Opportunity International: Findings on Financing Africa's Smallholder Farmers

In the February MPEP Seminar entitled, “Latest Impact Findings on Financing Africa’s Smallholder Farms,” John Magnay and Simona Haiduc of Opportunity International shared that, based on a recent impact evaluation of loans given to smallholder farmers across three countries in Africa, most saw an increase in access to inputs, agricultural extension advice, and links to markets. The study found marked improvements in quality of life as well.

Since 2009, Opportunity International delivered 165,000 loans in 8 countries. The organization was interested in not only whether agricultural output improved, but also whether there was any improvement in farmers’ quality of life. The impact evaluation focused around two key questions: 1) What was the impact of the program on the agricultural outputs of smallholder farmers? 2) In what ways did this program change farmers’ everyday lives more broadly?

Using a mixed methods approach, the study revealed several key findings:

• Increased access to agricultural inputs (68 percent used fertilizer versus 49 percent in the control group)
• Increased in crop yields (up to 54 percent greater than the control group)
• Expanded crop production
• Increased access to marketing channels
• Greater price transparency
• More modifications to farming approaches after receiving agricultural support and training (83 percent of client farmers trained by extension services)
• Hired additional labor for their farms during peak seasons

Though the situation varied based on the crop type, most farmers increased access to inputs, agriculture extension advice, and links to markets. In terms of quality of life, the study revealed an improved cash flow as a result of increased production, households being able to invest in assets and income generating activities, increased access to education and improved food security, as well as a perceived greater positive changes to household as compared to the control group.

Through Opportunity International’s experiences, they’ve identified several challenges and lessons learned:

1. Tracking individual farmers. As a financial institution, they don’t rely on extension services to provide and track data on their clients. Magnay stressed the importance of making sure that data on individual farmers within groups are being carefully tracked in-house.
2. Effective extension service providers are absolutely necessary.
3. Input dealers. The timeliness and certification of input dealers is critical. Opportunity International has been intentional about developing relationships with input dealers to support their programs.
4. Social capital and farmer groups. Often, farmer groups are created to jointly receive training. When finance is introduced, sometimes there’s a breakdown within the group to provide the group guarantee. Magnay emphasized the importance of fostering social capital within farmer groups to build trust among its members.
5. Working with off-takers. Opportunity International is interested in increasing household income, so productivity per unit farmer is critical. However, this isn’t the same mentality that off-takers typically adopt. Therefore, it’s important to find win-win opportunities with market off-takers when possible.

Moving forward, Opportunity International is using a branchless banking model, as they are doing in Tanzania. The organization still uses village-based extension services through a partnership with Grameen Foundation’s Community Knowledge Workers in Uganda. In this way, extension services not only provide support to the farmers, they also gather data for the bank. Most importantly, this data-gathering increases the information and feedback from the bank to the farmer, enabling them to identify issues with production or financial services available. It can also become a source of income for the farmer.

The seminar concluded with a lively audience question and answer session. For more in-depth information, check out the seminar screencast.